Competition Authority probing €2bn bid-rigging cartel

By Brian Carroll.

DETECTIVES have uncovered evidence pointing to a E2.5bn conspiracy to rig bids on

Government construction contracts.

More than 30 construction companies are being investigated for falsifying tenders and up to 110 firms may have participated.

Every major Government construction contract for the past 10 years is under review.

The Competition Authority this weekend refused to comment on any probe.

However, in a statement issued in response to the Irish Mail on Sunday’s exclusive revelations, it said it would offer immunity to those willing to testify about their involvement in bid-rigging.

The authority and the DPP are offering whistleblowers a place on what they called the Cartel Immunity Programme.

The authority and officers seconded from the Garda Bureau of Fraud Investigation have executed more than 20 search warrants at construction company offices nationwide.

After a two-year investigation, detectives made a critical breakthrough recently when they discovered falsified tenders agreed between companies.

The documents appear to show a conspiracy between various companies to alternate the winning of Government construction contracts by submitting falsified tenders.

The companies were agreeing in advance which would submit the lowest tender and, while the officers are concentrating on 30 companies at the moment, there is evidence that up to 110 firms may have participated.

The Competition Authority said: ‘The authority treats investigations into allegations of bid-rigging very seriously. Anyone with information on such activities would be encouraged to contact us.

‘Of particular interest would be information from anyone that may work or have worked previously in the industry and would have attended meetings, have knowledge of agreements between competitors on taking turns at winning contracts, or knowledge of communication generally among companies relating to how they operate agreements.

‘For any individuals concerned about their own involvement in bid-rigging activities, it is worth looking into the Cartel Immunity Programme that is operated in conjunction with the DPP.

The programme offers the opportunity for anybody involved in a cartel to avoid prosecution by being the first person in a cartel to come forward and cooperate fully with the authority investigation.

‘That person or company cannot be the leader of the cartel.’ The Cartel Immunity Programme number is 087 763 1378.

The authority refused to comment on the specifics of its investigation.

However, the MoS has learned that the investigative unit in the cartels division of the Competition Authority, assisted by two detective sergeants from the Garda

Bureau of Fraud Investigation, achieved major breakthroughs in recent months.

A source close to the eight-person investigation team said: ‘We were gobsmacked when we started looking into this. I can’t go into how or why the investigation started, but no one expected it to be this big.

‘You’re really talking about every public tender for Government construction contracts, hospitals, schools, and even a couple of major private contracts. We are going back to contracts from the late 1990s.’

Fine Gael and Labour have called on the Government to give extra investigative resources to the Competition Authority to expedite the investigation.

An expert working on the investigation said: ‘The bid-rigging is very sophisticated. It works like this. State buildings are being refurbished across the country, for example.

‘The Office of Public Works has to put a public tender out for each project. The OPW looks for expressions of interest. People are then asked to send a detailed tender document. There is a rigged system in place where the builders decide it is a particular person’s turn to win the contract.

‘You have eight contractors. The person whose turn it is to win the contract draws up all eight tenders, ensuring his is the lowest, even though it’s inflated by several hundred thousand euros.

He then sends a tender to each of the other people. ‘This “cover” or tender is then submitted by the other builder to the OPW, even though they know they can’t win the contract.

In this way they divvy up all the Government construction contracts.’ The OPW has had a total gross expenditure of over E6bn in 10 years.

The Department of Education separately spends E500m a year on school building and refurbishment projects. The Department of Health administers the hospital building programme, for which E564m was set aside for 2006 alone.

It’s understood that some of the search warrants executed by detectives working for the Competition Authority have resulted in the seizure of ‘cover letters’.

‘You are talking about a very narrow window here,’ said the expert. ‘You have to seize the cover letter between the tender being advertised and the tender being issued. The investigators have done that in a number of cases.

‘There’s 30 companies at the core of this, but it had to be broadened out after some of the searches.

There’s about 110 companies involved in total. We are talking [about] a long investigation here.’ Company directors found guilty of bid-rigging or operating a cartel can face up to five years in prison and/or a fine of E4m or 10pc of the company’s turnover, whichever is bigger.

A Competition Authority team is preparing files for the DPP. Sources, however, say a combination of staff shortages and the complexity of the cases means the investigation could take another two years at least.

‘In fairness to the Government, it had no idea of the size of this thing. Much more staff are needed.

‘When we started looking into it, we were amazed. The chartered accountants haven’t put a figure on it yet but you are talking about at least E250m a year, going back 10 years at least.’

Fine Gael deputy leader and finance spokesman Richard Bruton said: ‘We deploy 14,000 gardaí a day to deal with so-called ordinary crime. White collar crime is serious crime and we have to deploy resources to match.

‘The State has to take this seriously. If there are allegations of this magnitude, the Competition Authority has to be given the resources. We are talking here about E2.5bn. That’s equivalent to E2,000 out of the pocket of every family in the country.’

Labour finance spokeswoman Joan Burton said the cost of public construction contracts in Ireland had always been suspiciously high.

She called on the Government to increase resources to the Competition Authority.‘It has been an ongoing cause of complete puzzlement to many, many people how the cost of construction contracts and public projects have been so high here relative to other countries. Almost any public project you can think of in Ireland has been far more expensive than equivalent projects in other EU countries.’